AUSTRALIAN WHEAT BULLETIN - December 2005Wednesday, 21 Dec, 2005
As 2005 comes to an end, the global wheat crop has continued to get larger. A very good finish to the season in Australia has pushed our crop to over 23 million tonnes, and possibly to the second largest crop on record. Crop estimates for Canada and China have also increased.
While the world will consume more wheat than it has produced in the 2005/06 season, the shortfall is not enough to drive down wheat stocks outside of China. Basically competition among the major exporters remains high, which continues to put pressure on prices within Europe and the US. This then flows to all wheat markets.
So what is the good news? Basically global stocks overall remain low. A 20 million tonne fall in stocks outside of China would push wheat prices sharply higher, and is possible within the next 12 months.
We already have indications that the 2006 crop is not going well. In the Ukraine and southern Russia a significant acreage was never sown to winter wheat. This may result in the Ukraine actually having to import wheat. In some years they have been a major exporter, driving down prices for other exporters.
In the US their new winter wheat crop has seen drier conditions this year, and that crop is nowhere near as good as 12 months ago going into the dormancy period. As well, we have higher fertiliser costs and lower profits generally from cropping. The ability to achieve further productivity increases on a global scale will be reduced in 2006.
We are likely to see a degree of uncertainty during the March - May period as production settles down for the year. This should drive prices much higher than current levels in US futures markets. If the uncertainty about production becomes a reality, prices will remain higher going into the end of 2006. The important point is that prices should be high close to the New Zealand harvest period, and into the period for forward contracting for the 2006/07 crop.
Malcolm Bartholomaeus
Managing Director
Callum Downs Commodity News
Clare, South Australia
Ph 61 8 88422781
Email callum@capri.net.au
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